Why Mobile Home Park Rents Can Be Pushed Higher Than Others

Many landlords are scared to push their rents right now. In the self-storage industry, for example, landlords are considering rent reductions more than increases, and many real estate owners feel lucky if they can leave their rents unchanged this year. Articles are abundant, talking about the inability of office and commercial landlords to maintain current rent levels if they want to attract or retain tenants.

Rents Falling Everywhere – Are Mobile Home Parks Immune?

Well, it’s a different story in mobile home park land. And it highlights some of the key reasons that mobile home parks are the best niche in real estate investing.

So how can you raise mobile home park rents when every other landlord is stopped dead in their tracks? Several reasons:

It costs a tenant $3,000 to move their mobile home out of your park and into another. So, basically, you can continue to raise rents because the cost for the tenant to move is far higher than the resulting rent increase.

The rents are low to begin with, so when you raise a $200 per month rent by 10%, it’s still just a $20 per month increase. The normal lot rent in the U.S. is about that much.

Mobile home park rents are still far, far below apartment rents. Thanks to the rampant rent increases by apartment owners over the last decade, a two bedroom apartment in the worst part of town in most cities is still $600+ per month. Mobile home park lot rents have a long, long way to go before they bump up against their apartment competition.

The laws of supply and demand. There is still a lot of demand out there for mobile homes. Why? I hate to pin it to anybody, but the feedback we get is that people crave owning their own yard and getting away from having neighbors beating on their floors, ceilings and walls in apartments, as well as escaping the over-zealous management style of most apartment complex managers.

So how much farther can mobile home lot rents go?

As you can see from these examples, really far. There are not too many parks out there that are bumping up against the ceiling of rational rent levels. That is not to say that it’s impossible. In Denver, Colorado, for example, there are four-star parks that have lot rents approaching $700 per month. That’s probably too high. But for your average park owner out there, you’d have to increase your rent for 20 straight years at 10% per year to hit that level — and by then, inflation has taken the average rent rates higher still.

So, if you want to find a class of investments that allows you to increase the rents a significant amount each year, whether it’s feast or famine in the general economy, then mobile home parks are worthy of further examination.

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6 Comments

Mobile Home Parks are monopolies, plain and simple.
Sadly, many mobile home parks in our state, and every other state in the USA, have been purchased by greedy corporate vipers who hide behind anonymous “LLC” names and claim they are complying with California Mobile Residency Law (MRL) when they provide only the corporation’s name as the park owner, rather than human beings who are collecting the space rents for other human beings. Do the math…200 spaces times $? dollars per month…these folks are not the poor saps they claim to be who need to turn a higher return on their investments!!

They see the monopoly that was inadvertantly created when mobile home parks were originally established to offer a unique kind of housing community to seniors, low income families, and anyone who wanted an affordable second home. We, mobile home owners, are a unique population in that we purchased our homes, so we are home owners, but we rent the land under our homes. Initially this was seen as a good use of land and it brought a fair return on the landowner’s investment into the infrastructure. A portion of the monthly space rents were to be used to maintain the infrastructure so the burden was not completely left to the land owner.

That was then…this is now. Now, home owners are expected to pay “passthrough” costs for infrastructure maintenance over and above their monthly rent. Also, to pay maximum rent amounts, based on the rental market where renters do NOT own their homes. Very often bullying management teams are put in place to discourage and leverage older, often helpless senior residents out of their older homes so the spaces can be filled with new, bigger double or triple wide homes that could sell for high dollars and surely demand much higher monthly space rent, leases and all. I have seen homes purchased by the LLC for as little as $1000 as frightened little old ladies and gents flee to safer havens with relatives or rest homes, then the home is refurbished & resold for a huge profit, or destroyed and replaced, leaving the original owner with virtually no equity value.

Now mobile home park owners want to eliminate rent control in the few counties and cities of California who established a ceiling on the amount of rent home owners can be charged in each space. As I said, do the math and you’ll be shocked at the cream these investors are taking from our parents, grandparents, aunts, uncles, relatives, and poor families, as they continue to “cry poor” as if they need MORE, MORE, MORE profits. Sad, very sad.

There are a few of MOBILE HOME OWNER groups in California who try to stand up for their home owners rights. However, the money that the PARK OWNERS accrue from home owners outweighs the accrual of monthly group dues by billions of dollars, so Park Owners national and statewide lobbying group, Western Manufactured Housing Communities Association, puts plenty of money into blocking legislation that might assist mobile home owners in their plight.

All is not lost because, there seem to be a few politicians, mostly the new ones, who have not yet sold out to the big money interests. There are some bills that float in and out of the California State Legislature that actually have the interests of mobile home owners in mind. I remember that, as a society of human beings who cared about the other human beings we live with, we established some guidelines that required a certain percentage of housing in each county or city to be low cost. If our citizens and political representatives would look a bit closer, they might see mobile home parks as a place where senior citizens, people who need respite, and low income families could feel safe and live in an environment where they are not seen as faceless “cash cows”.

I live in a large mobile home park in Denver (actually a suburb). Our base rent is just over $600 per month, plus fees for water, sewer, and pets. Total runs around $640. When we moved in 10 years ago it was $400.

They are losing tenants left and right, but lot rents continue to rise. We have never had a year it didn’t increase at least 4%. Our street alone is only 60% occupied and that’s average. Not only are owners moving their homes or selling them to others who move them out of state, they’re abandoning them to the park, who can’t find owners or renters.

The corporation that owns the park just doesn’t get it – if the rents were reasonable, not only would their lots be full, they’d have a waiting list. We have a beautiful view of the city and are nestled against the foothills. Neighbors are great. We also have easy access to ski areas and are about a mile from the new light rail.

Would we like to move? Sure…but like the article states, it’s still better than an apartment, which was our main motivation for moving here.

The ability to raise rents does not mean that park owners should be without conscience, or that there are not upper limits to high rents can go.

Many of the 4 and 5 star communities out there have reached a “no man’s land” of lot rents which are clearly too high. We do not recommend anyone buy those type of communities for that very reason. We urge investors to only buy “affordable housing” communities, which are normally 3 star and below — communities with rents of $200 to $300 NOT $600+. The upper-end communities are awash in vacancy because they strayed from the busness model that had worked for decades.

As for the morality of raising rents, my only rebuttal is that parks are a bargain compared to apartments. I was recently in the worst part of Dallas and saw a “for rent” sign on what had to be the worst apartment complex I’ve ever seen — guys selling drugs out front, rusted cars on blocks on the street, trash everywhwere — too bad to even communicate properly. So I whipped out my cell phone and called for the rate. What do you think a 2 bedroom in this dangerous dump rented for? Try $650 per month. Compare that to a safe, clean park with lot rent of $275, and a mobile home you can buy for $2,000. If you want to attack a group with no moral compass, I suggest that some apartment owners are far worse. Park owners, for the most part, manage and control their rent increases well — and provide a product that people want and can afford.

The higher the space rent the lower the value of the mobilehome. As the cost of space rent rise to $1100 per month, the mobile home cannot be resold. Over $1500 per month mobilehome owners will abandon their home and the park owner will acquire the house. Then the park owners can and will sell the mobilehome to a new owner $50,000 with new lower rent of $700. Then the circle of unfair and unethical practice is repeated , this happens forever.

Park owners increase the rent on each sale/transfer up to 10%. It causes the rent to rise up to 259% for the 10th resale. In addition to increasing rent on the sale of the mobile home, the park owners increase rent annually by 5%. This annual increase is more benefit than lending a mortgage loan at 5%, 30 years fixed, because park owners do not lend a penny for this similar loan. And it is 30 years because the mobile home owners will abandon their home sooner or later. After 30 year, the rent will rise up 432%. This evil scam can be recognized by comparing the increase on space rent to the increase in minimum payment by government or an employee salary increased based on inflation, or the price of the house increased and decreased in the market.

By restricting sublease (798.23.5) and exempting on rent control (798.17) the California Mobilehome Residency Law 2009 kills the property right of the homeowners. This allows for the park owners to steal the value and in other words to rob mobile homes from innocent people. The law makers mistakenly treat the mobilehome owners as tenants who have no property, basically the same as if they were renting an apartment.

To run away from any potential punishment for this evil scam, park owners sell their park and this requires evictions to all of the mobilehome tenants, disregard the Detrimental Reliance/Estoppel doctrine.